News

Lenders have eased their criteria on home loan lending to the self-employed and workers on fixed-term contracts, according to mortgage brokers.

However, the choice of products on offer to these groups remains limited.

In the five years following the economic downturn, it became more difficult for these borrowers to secure mortgages as, on the whole, banks and building societies discontinued self-certification loans, which was the only mortgage available to those on irregular incomes.

Borrowers applying for self-certification loans were not required to prove their income but this left them open to misuse, with some homebuyers borrowing more than they could afford.

However, with self-employment up 10% since the start of the financial crisis and contractors accounting for 14% of the UK workforce, lenders are now amending their criteria to allow self-employed workers to get on the property ladder.

Andrew Montlake of mortgage broker Coreco, cites a shift to contracting and freelancing as a reason for the ease in lending.

‘We have seen a shift in the way people work over the past few years, especially within the City of London where many traditionally employed people have switched to contracting or freelance,’ he said.

‘Lenders have been a little slow to understand this type of contract, which is after all not necessarily any more risky than an employed position. But it is pleasing that in recent months more lenders have begun to shift their criteria to cater for these working habits,’ he added.

Halifax recently made its standard mortgage range available to contractors earning at least £500 per day or £75,000 per year on a contract and can prove that they have been in the same industry for at least one year.

More information on contractor mortgages

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